The famous Tornado Cash crypto mixer was sanctioned by the U.S. Department of Treasury on Monday, prohibiting Americans from using a business that the agency claims “launders the proceeds of cybercrimes.”
“Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in a statement.
What is Tornado Cash crypto mixer?
By combining a user’s tokens with a pool of other users’ assets on the network, crypto mixers are intended to hide the trails of money. They go above and beyond the limitations of conventional crypto platforms by further obscuring the identities of those doing transactions.
The government claims that Tornado Cash crypto encourages illegal activities, including “facilitation of heists, ransomware schemes, fraud, and other cybercrimes,” even if other users use it only to safeguard their privacy.
“Virtual crypto mixers that assist criminals are a threat to U.S. national security,” the Treasury Department said.
Tornado was utilized in a number of well-known cryptocurrency heists this year, including the $615 million token theft from Ronin, a network supporting the nonfungible token game Axie Infinity, and a $100 million attack on American firm Harmony. Security experts connected both to the Lazarus Group, a hacking organization supported by the North Korean government.
Elliptic, a blockchain analytics company, discovered that Tornado Cash crypto was used to launder at least $1.5 billion in proceeds from crimes like ransomware, hacking, and fraud, as well as the entirety $100 million taken from the Harmony bridge in June.
Tornado Cash has been used to launder more than $7 billion worth of virtual money since its inception in 2019, according to a significantly higher estimate from the U.S. Treasury. The worth of all digital assets transmitted via Tornado Cash is shown by that number.
In order to determine the origin of the cash, several blockchain analytics tools have been able to “demix” cryptocurrency delivered through Tornado. For instance, Elliptic claims to have been able to link a number of fresh ether wallets to cryptocurrency taken from Harmony.
The measures taken against Tornado Cash crypto are a continuation of the penalties imposed in May 2022 on Blender.io, another well-known business.
“The United States will continue to pursue actions against crypto mixers laundering virtual currency for criminals and those who assist them,” said Antony J. Blinken, Secretary of State, in a statement on Monday.
Tornado Cash crypto and the accompanying cryptocurrency wallet addresses have been added to the list of “Specially Designated Nationals” maintained by the Office of Foreign Assets Control (OFAC), a watchdog agency under the control of Treasury. Now that anyone using these wallet addresses could be subject to criminal fines, some cryptocurrency owners with good intentions may be concerned.
The Treasury Department stated that all transactions involving any property or interests in property of designated or otherwise blocked people “by U.S. persons or within (or transiting) the United States are prohibited unless authorized by a general or specific license issued by OFAC, or exempt.”
According to Coin Center, a nonprofit organization specializing in cryptocurrency regulation, enacting such a move might be challenging for the government and too restrictive. This is due to the fact that Tornado Cash, an open-source application, is not used by a single individual or organization.
The action appears to be the “sanctioning of a tool that is neutral in character and that can be put to good or bad uses like any other technology,” Coin Center wrote.
Who runs tornado Cash?
Privacy protocols, according to the co-founder of Ethereum’s most popular coin mixing service, are defending people’s right to financial privacy. Since it was discovered last week that hackers were using Tornado Cash to mix ether stolen from digital asset exchange Crypto.com, the mixer has attracted attention.
It allows users to hide their digital footprint on the Ethereum blockchain. Roman Semenov, a co-founder, claimed in an interview with CoinDesk that because the protocol is intended to be autonomous and decentralized, the company has little influence over what its users do with it.
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